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Photronics, Inc.$11.32($.05)(.44%)

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 Photronics Reports Fourth Quarter Fiscal 2016 Results
   Tuesday, December 06, 2016 6:08:37 AM ET

BROOKFIELD, CT--(Marketwired - December 06, 2016) -

Fourth quarter sales were $107.4 million, down from previous periods on weak end market demand across nearly all markets

Net income of $5.3 million ($0.08 per diluted share) includes non-recurring tax benefit of $1.8 million ($0.03 per diluted share)

Net cash improved to $247 million, providing additional financial strength and flexibility to fund growth

First quarter 2017 guidance: sales between $104 and $112 million; diluted EPS between $0.01 and $0.06

Photronics, Inc. (PLAB ), a worldwide leader in supplying innovative imaging technology solutions for the global electronics industry, today reported financial results for fiscal 2016 fourth quarter ended October 30, 2016.

Fourth quarter sales were $107.4 million, down 13% sequentially and 24% compared with last year. Sales of flat panel display (FPD) photomasks were $25.1 million, down 17% compared with last year and 20% sequentially, while sales of integrated circuits (IC) photomasks were $82.3 million, down 26% from the same period last year and 10% from last quarter. Net income attributable to Photronics, Inc. shareholders was $5.3 million ($0.08 per diluted share) and includes a non-recurring tax benefit of $1.8 million ($0.03 per diluted share) primarily related to the recognition of certain tax benefits in Taiwan that were determined to be realizable in filings for future tax periods, compared with $18.6 million ($0.25 per diluted share), for the fourth quarter of 2015.

"Demand for our products fell during the quarter as many of our customers decreased new design activity, reducing the demand for new photomasks, especially at the high end," said Peter Kirlin, chief executive officer. "High end FPD remains soft as the industry transitions from LCD to OLED, temporarily reducing new design activity. High end IC memory is starting to see pricing recovery, driving new design activity but not yet impacting mask demand. High end IC logic, which can be volatile, was down this period. Net income fell due to the lower sales level, but we were able to offset some of the decline by reducing our operating expenses. Despite lower sales and net income, cash flow from operations was positive and we added to our already strong balance sheet. We are well positioned to invest in our growth initiatives for IC and FPD, while also evaluating strategic M&A opportunities."

Full Year Results

Full year sales were $483.5 million, down 8% compared with last year. Sales of IC photomasks were down 13%, while sales of FPD photomasks increased 15%. Net income attributable to Photronics, Inc. shareholders was $46.2 million ($0.64 per diluted share), compared with $44.6 million ($0.63 per diluted share) in 2015. Non-GAAP net income attributable to Photronics, Inc. shareholders was $32.6 million ($0.47 per diluted share), compared with $45.5 million ($0.64 per diluted share) in 2015.

First Quarter 2017 Guidance

Kirlin continued, "While we believe our end market demand will improve in 2017, we don’t anticipate any meaningful improvement during the first quarter. Markets should basically remain level with fourth quarter demand, with potential tailwinds from high-end logic offset by seasonal softness from Christmas and Chinese New Year holidays." For the first quarter of 2017, Photronics expects revenues to be between $104 million and $112 million and net income attributable to Photronics, Inc. shareholders to be between $0.01 and $0.06 per diluted share.

Non-GAAP Financial Measures

Non-GAAP net income attributable to Photronics, Inc. shareholders and non-GAAP earnings per share are "non-GAAP financial measures," as such term is defined by the Securities and Exchange Commission, and may differ from non-GAAP financial measures used by other companies. The attached financial supplement reconciles non-GAAP financial information with Photronics, Inc.’s financial results under GAAP. Photronics, Inc. believes that non-GAAP net income attributable to Photronics, Inc. shareholders and non-GAAP earnings per share that exclude certain non-cash or non-recurring income or expense items are useful for analysts and investors to evaluate Photronics, Inc.’s future on-going performance because they enable a more meaningful comparison of Photronics, Inc.’s projected earnings and performance with its historical results of prior periods. These non-GAAP metrics, in particular non-GAAP net income attributable to Photronics, Inc. shareholders and non-GAAP earnings per share, are not intended to represent funds available for Photronics, Inc.’s discretionary use and are not intended to represent, or be used as a substitute for, operating income, net income or cash flows from operations data as measured under GAAP. The items excluded from these non-GAAP metrics, but included in the calculation of their closest GAAP equivalent, are significant components of the consolidated statements of operations and must be considered in performing a comprehensive assessment of overall financial performance. Non-GAAP financial information is adjusted for the following items:

Non-recurring tax benefit in fiscal 2016 related to the recognition of certain tax benefits in Taiwan that were determined to be realizable in filings for future tax periods

Non-recurring net gain on sale of investment in fiscal 2016

Financing expenses in fiscal 2015 related to the exchange of convertible senior notes

The presentation of this financial information should not be considered in isolation from, or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States. The attached financial supplement reconciles non-GAAP financial information with Photronics, Inc.’s financial results under GAAP.

Conference Call

A conference call with investors and the media to discuss these results is scheduled for 8:30 a.m. Eastern time on Tuesday, December 6, 2016. The call can be accessed by logging onto Photronics’ web site at www.photronics.com. The live dial-in number is (877) 377-7095 or (408) 774-4601 outside of the United States and Canada. The call will be archived on Photronics’ web site for instant replay access.

About Photronics

Photronics is a leading worldwide manufacturer of photomasks. Photomasks are high precision quartz plates that contain microscopic images of electronic circuits. A key element in the manufacture of semiconductors and flat panel displays, photomasks are used to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits, a variety of flat panel displays and, to a lesser extent, other types of electrical and optical components. They are produced in accordance with product designs provided by customers at strategically located manufacturing facilities in Asia, Europe, and North America. Additional information on the Company can be accessed at www.photronics.com

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements made by or on behalf of Photronics, Inc. and its subsidiaries (the Company). The forward-looking statements contained in this press release and other parts of Photronics’ web site involve risks and uncertainties that may affect the Company’s operations, markets, products, services, prices, and other factors. These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental, and technological factors as well as decisions we may make in the future regarding our business, capital structure and other matters. These forward-looking statements generally can be identified by phrases such as "believes", "expects", "anticipates", "plans", "projects", and similar expressions. Accordingly, there is no assurance that the Company’s expectations will be realized. For a fuller discussion of the factors that may affect the Company’s operations, see "Forward Looking Statements" in the Company’s Quarterly and Annual Reports to the Securities and Exchange Commission on Forms 10-Q and 10-K. The Company assumes no obligation to provide revisions to any forward-looking statements.

12-2016

PHOTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (in thousands, except per share amounts)

                                                                                                                                                                                          
                                                                                                                                                
                                                    Three Months Ended                                 Year Ended                                             
                                                    October 30,           November 1,           October 30,           November 1,        
                                                    2016                  2015                  2016                  2015               
                                                                                 
Net sales                                                  $        107,368      $        141,692      $        483,456      $        524,206   
                                                                                 
Costs and expenses:                                                                     
                                                                                 
            Cost of sales                             (86,835  )            (97,078  )            (364,750 )            (381,070 )
                                                                                 
            Selling, general and administrative       (10,191  )            (12,189  )            (44,577  )            (48,983  )
                                                                                 
            Research and development                  (5,041   )            (5,177   )            (21,654  )            (21,920  )
                                                                                 
                        Operating income       5,301          27,248         52,475         72,233    
                                                                                 
Gain on sales of investments                                 -              -              8,940          -         
                                                                                 
Other income (expense), net                                  (69      )            308            (941     )            (2,193   )
                                                                                 
            Income before income taxes                5,232          27,556         60,474         70,040    
                                                                                 
Income tax benefit (provision)                               1,337          (5,406   )            (4,798   )            (13,181  )
                                                                                 
            Net income                                6,569          22,150         55,676         56,859    
                                                                                 
Net income attributable to noncontrolling interests          (1,313   )            (3,527   )            (9,476   )            (12,234  )
                                                                                 
Net income attributable to Photronics, Inc. shareholders   $        5,256        $        18,623       $        46,200       $        44,625    
                                                                                 
Earnings per share:                                                                     
            Basic                                   $        0.08         $        0.28         $        0.68         $        0.67      
                                                                                 
            Diluted                                 $        0.08         $        0.25         $        0.64         $        0.63      
                                                                                 
Weighted-average number of common shares outstanding:                                   
            Basic                                     68,025         66,575         67,539         66,331    
                                                                                 
            Diluted                                   68,906         78,631         76,354         78,383    
                                                                          
                                                                          

PHOTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands)

                                                                                                                             
                                                                           October 30,                                             November 1,
                                                                           2016                                                    2015
Assets                                                                                                                                     
                                                                                                                                    
Current assets:                                                                                                                            
              Cash and cash equivalents                                    $                    314,074                            $                    205,867
              Accounts receivable                                                        92,636                                           110,056
              Inventories                                                                22,081                                           24,157
              Other current assets                                                       12,795                                           20,680
                                                                                                                                    
                            Total current assets                                  441,586                                          360,760
                                                                                                                                    
Property, plant and equipment, net                                                              506,434                                          547,284
Investment in joint venture                                                                     -                                                93,021
Intangible assets, net                                                                          19,854                                           24,616
Other assets                                                                                    20,393                                           17,695
                                                                                                                                    
Total assets                                                                      $                    988,267                            $                    1,043,376
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
Liabilities and Equity                                                                                                                     
                                                                                                                                    
Current liabilities:                                                                                                                       
              Current portion of long-term borrowings                      $                    5,428                              $                    65,495
              Accounts payable and accrued liabilities                                   75,889                                           127,197
                                                                                                                                    
                            Total current liabilities                             81,317                                           192,692
                                                                                                                                    
Long-term borrowings                                                                            62,139                                           67,120
Other liabilities                                                                               19,337                                           21,498
                                                                                                                                    
Photronics, Inc. shareholders’ equity                                                           710,363                                          646,555
Noncontrolling interests                                                                        115,111                                          115,511
                            Total equity                                          825,474                                          762,066
                                                                                                                                    
Total liabilities and equity                                                      $                    988,267                            $                    1,043,376
                                                                                                                                    
                                                                                                                                    
(a) Balances reflect the impact of the adoption of a new accounting standard in fiscal year 2016 related to the balance sheet classification of deferred taxes (ASU 2015-17)
 

PHOTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands)

                                                                                                                                  
                                                                                                       Year Ended                                             
                                                                                                       October 30,           November 1,        
                                                                                                       2016                  2015               
                                                                                                                    
Cash flows from operating activities:                                                                                      
           Net income                                                                                  $        55,676       $        56,859    
           Adjustments to reconcile net income to net cash provided by operating activities:                 
                                                 Depreciation and amortization                    82,841         82,413    
                                                 Gain on sales of investments                     (8,940   )            -         
                                                 Changes in assets and liabilities and other      (7,440   )            (6,077   )
                                                                                                                    
Net cash provided by operating activities                                                                       122,137        133,195   
                                                                                                                    
Cash flows from investing activities:                                                                                      
           Purchases of property, plant and equipment                                                    (50,147  )            (104,033 )
           Proceeds from sales of investments                                                            101,853        -         
           Other                                                                                         584            (272     )
                                                                                                                    
Net cash provided by (used in) investing activities                                                             52,290         (104,305 )
                                                                                                                    
Cash flows from financing activities:                                                                                      
           Repayments of long-term borrowings                                                            (57,609  )            (9,571   )
           Payments to noncontrolling interests                                                          (12,856  )            -         
           Proceeds from share-based arrangements                                                        3,463          2,651     
           Other                                                                                         (20      )            (179     )
                                                                                                                    
Net cash used in financing activities                                                                           (67,022  )            (7,099   )
                                                                                                                    
Effect of exchange rate changes on cash                                                                         802            (8,853   )
                                                                                                                    
Net increase in cash and cash equivalents                                                                       108,207        12,938    
Cash and cash equivalents, beginning of period                                                                  205,867        192,929   
                                                                                                                    
Cash and cash equivalents, end of period                                                                      $        314,074      $        205,867   
                                                                                                                    
                                                                                                                    

PHOTRONICS, INC. AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Financial Information (in thousands, except per share data) (Unaudited)

                                                                                                                                                                           
                                                                                                         Three Months Ended                                             Year Ended
                                                                                                         October 30,                   November 1,               October 30,                   November 1,
                                                                                                         2016                          2015                      2016                          2015
                                                                                                                                                          
Reconciliation of GAAP to Non-GAAP Net Income Attributable to Photronics, Inc. Shareholders                                                        
                                                                                                                                                          
GAAP net income attributable to Photronics, Inc. shareholders                                            $          5,256              $          18,623         $          46,200             $          44,625
                                                                                                                                                          
                             (a) Income tax benefit                                                          (1,834     )                  -                  (4,838     )                  -
                                                                                                                                                          
                             (b) Gain on sales of investments, net of tax                             -                      -                  (8,753     )                  -
                                                                                                                                                          
                             (c) Financing expenses, net of tax                                              -                      -                  -                      901
                                                                                                                                                          
                                                                                                                                                          
Non-GAAP net income attributable to Photronics, Inc. shareholders                                        $          3,422              $          18,623         $          32,609             $          45,526
                                                                                                                                                          
Reconciliation of GAAP to Non-GAAP Net Income Applicable to Common Shareholders                                                                    
                                                                                                                                                          
Weighted average number of diluted shares outstanding                                                                                                     
                                                                                                                                                          
                                                          GAAP                                        68,906                 78,631             76,354                 78,383
                                                                                                                                                          
                                                          Non-GAAP                                    68,906                 78,631             76,354                 78,383
                                                                                                                                                          
Net income per diluted share                                                                                                                              
                                                                                                                                                          
                                                          GAAP                                    $          0.08               $          0.25           $          0.64               $          0.63
                                                                                                                                                          
                                                          Non-GAAP                                $          0.05               $          0.25           $          0.47               $          0.64
                                                                                                                                                          
                                                                                                                                                          
                             (a) Represents tax benefit primarily related to the recognition of prior period tax benefits and other tax positions no longer deemed necessary in Taiwan
 
                             (b) Represents gain on sales of investments in a foreign entity
 
                             (c) Represents financing expenses related to the exchange of $57.5 million of 3.25% convertible senior notes
 

PHOTRONICS, INC. AND SUBSIDIARIES Non-GAAP Financial Measure Reconciliation of GAAP Net Income to Non-GAAP EBITDA (in thousands) (Unaudited)

                                                                                                                                                     
                                     Three Months Ended                                                                                Year Ended
                                     October 30,                                November 1,                       October 30,                       November 1,
                                     2016                                              2015                                     2016                                     2015
                                                                                                                                         
GAAP Net Income (a)                         $               6,569                             $               22,150                   $               55,676                   $               56,859
                                                                                                                                         
Add: interest expense                                616                                        1,178                             3,366                             4,991
Add: income tax expense (benefit)                    (1,337          )                                 5,406                             4,798                             13,181
Add: depreciation and amortization                   22,304                                     20,777                            82,406                            81,653
Add: special items (b)                               980                                        905                               3,828                             4,590
Non-GAAP EBITDA                             $               29,132                            $               50,416                   $               150,074                  $               161,274
                                                                                                                                         
(a) Includes net income attributable to noncontrolling interests, and in the year ended October 30, 2016 includes gain on sale
of investment in a foreign entity
 
(b) Special items consist of stock compensation expense, and in the year ended November 1, 2015 includes financing expenses in connection with the exchange of $57.5 million of 3.25% convertible senior notes

For Further Information: R. Troy Dewar, CFA Director, Investor Relations (203) 740-5610 tdewar@photronics.com



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